Causal Relation between Stock Return and Exchange Rate: Evidence from India

Dr. Nishi Sharma

Causal Relation between Stock Return and Exchange Rate: Evidence from India

Dr. Nishi Sharma * §

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§ Panjab University, Chandigarh, India

Causal Relation between Stock Return and Exchange Rate: Evidence from India

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Abstract

The dynamic linkage between exchange rate and stock returns has been subjected to considerable attention from researchers worldwide. However the relationship of exchange rate with returns of different industrial sectors has not been much examined. In this reference the present paper investigates the causal relationship of Indian sector based daily returns with Indian rupee-US Dollar Exchange Rates for a period from January, 2007 to March, 2015. The study observed absence of normal distribution, unit root as well as co-integration in the data. Correlation between returns and Exchange Rates was found to be negative. Granger Causality test highlighted bidirectional causal relationship between the exchange rate and stock return for each sector except for Pharmaceutical and Media. Pharmaceutical index reported unidirectional relation running from exchange rate to the industry. In case of Media sector return and exchange rates a unidirectional relation running from the former towards the latter has been observed.

References

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Dr. Sharma. 2016. "Causal Relation between Stock Return and Exchange Rate: Evidence from India". Global Journal of Management and Business Research, Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 15 (GJMBR Volume 15 Issue C11).

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GJMBR Volume 15 Issue C11

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

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Classification

GJMBR-C Classification JEL Code: G10

Submission ReceivedFebruary 8, 2015
Peer Review Double Blind
Handling Editor
Accepted March 2, 2015
Published March 15, 2015

Version of record

v1.2

Issue date

January 11, 2016

Language

English

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Total Score: 153

Country: India

Subject: Global Journal of Management and Business Research

Authors: Dr. Nishi Sharma (PhD/Dr. count: 1)

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